Rep. Barney Frank (D-Ma.) has been the Dems’ pointman on the bailout since last Sept. While I was entirely unsurprised that he was carrying water for the financial industry, I didn’t think he’d say something as ridiculous as he did in this TPM interview. In this piece, he essentially says that “if ‘elites’ want the public to pony up their money in cases like this, they, the aforementioned ‘elites’ need to get serious about repairing and expanding the social safety net in the country …”, and then he goes on to suggest that the Federal gov’t should first pony up the money and then declare their expectations that the recipients will chip in to society.
Are you kidding me?
No, wait.
Are you fucking kidding me?
How many times can we get suckered like this? Didn’t anyone else take the lessons from Lucy and Charlie and the football in Peanuts?  Thea Skocpol gets it right:
The idea that “elites” will “get serious about repairing the safety net” if they are FIRST given billions of dollars of payoffs to shareholders who made bad decisions is the height of naivete. There are no corporatist institutions in U.S. politics that can enforce this kind of bargain, that can corral all the interests and get them to carry through on mutual promises. That is why Obama and the Democrats will get for the people in general exactly what they push through right now and will squander opportunities if they give money and leverage to “elites” first!
And she notes that there are no “who could have known?!” excuses here:
This is what Ira Magaziner imagined with health care back in 1992 — that he could get up front understandings with powerful interests by giving them concessions in the Health Security proposals, and they would let it get through Congress later. (I remember sitting in his office as I took notes for BOOMERANG and having him complain to me that he could not understand why the business roundtable types “lied” to him about what they would do!) Of course, they turned on him the moment Congress got ahold of things. Same thing will happen here.
No excuses, Rep. Frank. Treat us like we’re stupid, and you’ll get treated in kind.
tx2vadem
No surprise there. Private institutions act on self-interest. Survival is in their interest. Financial burdens that may have some general benefit to society are not necessarily in their self-interest. Even if they did support whatever the proposal was, the American Bankers Association is just one lobby. There are a ton of other business lobbies not getting a piece of this bailout pie that can raise appreciable opposition to legislation.
I do take issue with the quoted line: “payoffs to shareholders who made bad decisions.” I don’t know what the payoff has been to shareholders. A great many bank shares are down 80 to 90% from their peak last year. I guess if the meaning is that shareholders are getting a payoff in that they retain that residual value instead of nothing. I don’t see it has a huge payoff to shareholders though.
And about the bad decision making, that way overstates the power of shareholders. Shareholders do not really make decisions on how a corporation is run, management does. Shareholders also don’t have a great deal of influence on who sits on the board of directors (the body that then hires management). Granted shareholders have seen some increased power since Sarbanes-Oxley, but Chairman Cox has put the breaks on any further progress in that area. I’d be hard pressed to say an individual shareholder who reads the company’s financial statements could be held accountable for the mess that say Citigroup made. What was the bad decision shareholders made?
Most of these shares are held by institutional investors (mutual funds, pensions, 401ks, 401c3s and the like). They have trustees vote their shares and rely on an institutional investor service to inform their decisions. What was it that they could have known in the current system that could have lead them to stop some activity by the corporation? And then you have the holders of mutual funds, Exchange Traded Funds, and any index fund that hold pieces of those companies. Are they also included the shareholder who made bad decisions? For example, if you own a Dow Jones Industrial Average Index share, included in that basket is Citigroup. Are you then responsible for mismanagement at Citigroup? Should you be actively monitoring your trustees to ensure they are actively monitoring management at a company?
Given the increase in direct ownership of shares as a result of the demise of defined benefit retirement plans, that means a whole lot of regular folks are to blame. Plus, it seems like a very heavy burden. If you hold a diverse portfolio, which is just sound practice, that would entail maintaining an ongoing in-depth knowledge about what the companies you own are doing. And isn’t that the role of the management you, in theory, hired?